2011: U.S. vs. China, to the Economic Death?

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2011 is slated to be the year of global economic recovery. Unfortunately, economist Andy Xie argues that this prediction is not based in reality. Xie describes next year's global economy as "a race between the U.S. and China, to see who goes down first." He explains that one country's success depends on the other's failure. So, when the U.S. economy slipped into the last big recession, China "won the last race. To win the next one, China must tackle its inflation problem, which is ultimately a political and structural issue, in 2011. If China does, the U.S. will again be the cause for the next global crisis. China will suffer from declining exports but benefit from lower oil prices." Xie thinks China may also have a leg up this time around, though it must tackle inflation in order to succeed. He suggests this can only be achieved by limiting government expenditures.

Xie's warning:

While conspiracy theories are very popular in China, the reality is that only a bad mistake by itself can cause a big crisis. China is so large and so popular among multinational corporations that it has numerous advantages in the today's world. The international environment is a big plus for the country. Only a big mistake by itself can trigger a crisis.

This article is from the archive of our partner The Wire.